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Paycheck or Portfolio? What do you want in Retirement?

By Steve Gaito

McDowell Countysteve gaito


I recently attended an online retirement summit where a presenter asked us a question: “Do your retired clients want a portfolio or a paycheck in retirement?”

Since I have been on the investment side of the business for most of my career and have helped many clients build a solid retirement plan with a 401(k) or 403(b) plan, my knee jerk reaction was a portfolio.

When I was comparing The State Retirement Plan and Optional Retirement Plan available to NC State professors, the math showed that the Optional Retirement Plan was the better choice. For most of the faculty, this was the best choice at the time.

After multiple significant downturns in the market since 2000 and the increasingly large government debt, I now see the paycheck vs. portfolio debate from a new perspective. Over the last 10 years, I have worked with retirees under both systems and discovered that those on the State Retirement Plan seem to be more satisfied than those on the Optional Retirement Plan.

I had a hard time understanding why someone that was getting a check every month from the state and had $300,000 in a 403(b) plan was happier than the one that had $1,500,000 in their optional retirement account.

This all made sense to me when I heard the story of the two golfers playing a round when the news came in about the massive drop in the stock market. The golfer that had the monthly guaranteed income wasn’t affected because his paycheck would be in the bank at the beginning of the month. The other golfer with a 401(k) or IRA plan was a wreck and could not concentrate on golf anymore.

Guaranteed income creates a level of satisfaction and security that is hard for portfolios to match.   

Does this mean that future retirees with 401(k) plans are doomed to be unhappy in retirement?

Absolutely not.

It means they need to create lifetime guaranteed income like a pension—designed for their specific needs and circumstances.

It makes sense psychologically because for most of their working careers they have received a regular paycheck. They know how to manage a specific amount of recurring income.

But most retirees don’t have the experience or knowledge to manage a portfolio or the risks that extend well beyond the obvious market risk. Here are just some of the factors that will affect your retirement plan:

  • Longevity: How long will you need retirement income?
  • Long Term Care: How much of your retirement income will need to be allocated for health care?
  • Inflation and Deflation: Your retirement dollars won’t have the same buying power as they do today, and your assets could lose value.
  • Government Regulations: Changes in policies and the economic impact of global events like the recent pandemic can affect your retirement strategy.
  • Retirement Taxation: Without careful planning, you could lose more of your retirement than necessary because of complicated taxation laws.

These and other factors can have a significant impact on your retirement, but they can be managed with proper planning.

If you have between $300,000 to $3,000,000 set aside for your retirement, you need to address each of these in your retirement plan. Failing to address these risks means you don’t have a retirement plan—you have an investment account.

If you have less than $300,000, you’ll still need a plan for minimizing risk, but you will have fewer options.

As A CERTIFIED FINANCIAL PLANNER™ practitioner, I help people address these needs and create retirement income plans that allow you to enjoy your retirement and be happy.

I am available in person in my office, over the phone, and online via Zoom to help you create the retirement you deserve.


Steve is owner of Faith Based Health Care and Retirement Resource Management. He is a National Speaker on the topic of Social Security optimization, quoted in national publications like Money Magazine, US News and World Reports and Fox Business. Steve loves to educate and teach on financial topics like taxation of retirement accounts, long term care, healthcare, and efficient savings plans for small businesses. He has provided financial planning for missionaries through the International Mission Board. You can find Steve at 68 South Main St. in Marion, NC by calling 828-559-0299, email or visit his website at

Read more from Steve HERE.